Nike Just Hit a 12-Year Low. Is the Bottom Near?

NIke (NYSE:NKE) stock peaked five years ago on the strength of pandemic-driven demand, but since then, the business has steadily unraveled due to a string of poor strategic decisions, weak consumer discretionary demand, rising competition, and challenges from tariffs and inflation.

On Monday, the stock sank below $40 for the first time in more than a decade, falling 4% to a 12-year low even as there was no major news out on the stock.

A number of broader factors seem to be behind Nike's continuing slide in recent weeks, including a disappointing earnings report from On Holdings, rising long-term interest rates, which show investors preparing for a longer-term inflationary environment, and continuing risks from an evolving tariff regime.

Investors hoping for a turnaround in Nike stock have been burned for years, but is the flailing stock close to hitting bottom? Let's take a look at Nike's chances for a recovery.

Where Nike stands today

Despite the ongoing stock swoon, there may be more reason to be optimistic about a turnaround than there has been in several quarters.

Much of the tariff fiasco is over, and Nike expects to recover $986 million from International Emergency Economic Powers Act (IEEPA) tariff refunds, which led to a spike in net income in the fourth quarter.

More importantly, because the headwinds from the IEEPA tariffs are beginning to roll off, Nike expects to return to gross margin expansion in the current quarter, which ends in November, and that could mark the beginning of the turnaround in the business. Through the first half of the year, the company forecast revenue down low-to-mid single digits.

The collapse in Nike's stock has come as revenue growth has stalled and gross margin has come down, as the chart below shows.

NKE Gross Profit Margin (Quarterly) data by YCharts

As you can see from the chart, Nike's gross margin slumped from close to 48% to roughly 40% over the last five years, excluding the IEEPA-driven spike in the last quarter, and revenue growth has been flat or negative over the last three years.

Based on those results, it's not surprising the stock has lost more than 75% of its value over the last five years.

Image source: Getty Images.

The key to Nike's comeback

While the chart above is disconcerting, it also shows that a turnaround may be easier to achieve than investors think. Nike doesn't have to reinvent a whole new business in order for the stock to work from here. It just has to begin to make progress toward its earlier gross margin levels and return to steady revenue growth.

In addition to the forecast for first-quarter gross margin expansion, there are also some green shoots that could point to a recovery.

It's returned to growth in running, one of its biggest categories, as it's gained five percentage points in market share over the last five quarters, and its revenue has grown by $1 billion during that time. That shows the company pushing back on competition from On Holding and Deckers' Hoka brand.

It's returned to growth in North America, its biggest market, where revenue grew 5% in fiscal 2026, a sign its "Sport Offense" strategy is paying off, and it's reinvested in the wholesale channel after neglecting it under former CEO John Donahoe, as wholesale revenue grew by double digits.

Nike should be able to apply some of those lessons learned from the Sport Offense in North America to other regions.

Despite the stock's slide, Nike stock isn't cheap, but analysts expect earnings per share to begin to increase this year and accelerate into the following year.

If Nike can meet those expectations, the stock looks like it's about ready to bottom out. If it gets some help from the macro environment, there could be a lot of upside in the recovery.

Jeremy Bowman has positions in Nike. The Motley Fool has positions in and recommends Deckers Outdoor, Nike, and On Holding. The Motley Fool has a disclosure policy.